Limited Power of Attorney (LPOA)
Candlefocus EditorAn LPOA allows the account holder to define the scope of the third party’s authority: which types of decisions can be made and which types of actions can be taken. This can include routine decisions regarding the account or more frequent decisions if desired. The account holder may also specify a particular starting or ending date upon which the LPOA automatically terminates.
The LPOA is particularly useful for situations when the account holder will be unavailable or unable to make decisions in a timely manner, such as extended travel or illness. When used as part of an investment portfolio, it can provide peace of mind to the account holder by allowing a portfolio manager to make decisions without the account holder's intervention. In this case, the LPOA may permit the portfolio manager to buy and sell stocks, bonds, or other investments in order to keep the account profitable.
However, a limited power of attorney generally does not permit the account holder to withdraw money from the account or change the beneficiaries. This is because such actions require the account holder’s personal signature and authorization.
In addition to its use to manage an investment portfolio, a limited power of attorney can also be used to designate someone to handle legal and financial matters on the account holder’s behalf in the event of serious illness or if the account holder is otherwise unable to do so. This may include the authority to make bank deposits, manage insurance claims, and pay bills on the account holder’s behalf.
While a limited power of attorney can provide convenience and peace of mind to the account holder, it is important to keep in mind that the third party is legally responsible for any actions taken on the account holder’s behalf and must honor the scope of the LPOA. Account holders should also consider the potential risks of granting authority over their accounts to another person and choose carefully when selecting a third party to represent them.